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Show Me the Money, YouTube

Revenue-sharing has been a slow roller on Google's video-sharing site.

It's been six months since Chad Hurley shook the world. Speaking at the World Economic Forum in Switzerland, YouTube's co-founder hinted at the eventual rollout of a revenue-sharing plan for the world's most popular video-streaming website.

"We are getting an audience large enough where we have an opportunity to support creativity, to foster creativity through sharing revenue with our users," he said.

Well?

It's been an awfully quiet six months. In that time, the competition has gotten more creative in monetizing streams, top talent has strayed, and the world's still waiting to shake again. These are interesting times for Google's (NASDAQ:GOOG) YouTube.

It's about to get even more interesting.

March of MayYouTube did introduce revenue-sharing for the site's most popular contributors two months ago. It reached out to a handful of YouTube-created stars, such as Lonelygirl15 and Smosh, and offered them the same kind of revenue-sharing arrangement that the site has inked with thousands of midsized to large content creators.

You probably didn't know that video game publishers, record labels, universities, and independent movie studios are already on the ad-sharing gravy train. YouTube has just been quiet about it, opting to rattle the world instead of shaking it violently.

Maybe it didn't want to offend its most active community members. After all, like underpaid free agents swinging hot bats, it wasn't long before the site's most-trafficked clip-culture stars were recruited by more generous video-sharing sites.

Smosh is YouTube's most subscribed-to channel. With nearly 140,000 subscribers, it watches over almost 45,000 more registered users than silver medalist Lonelygirl15 can claim. Earlier this year, Smosh struck a sponsorship deal with video-sharing upstart Live Video. "Powered by LiveVideo.com" was the plug that peppered the introductions of the young comedic duo's offbeat uploads.

Was YouTube's biggest draw really promoting a rival website in its videos? You bet.

Meanwhile, Lonelygirl15 and her serial thriller turned to YouTube rival Revver.com to drum up the ad-sharing money when it failed to flow from the YouTube spigot. The show's production team didn't publicize Revver on its uploads, but it did the unthinkable on its Lonelygirl15.com website -- it embedded the feeds from Revver, instead of its larger YouTube home.

So how has the first phase of YouTube's revenue-sharing model with the community panned out? Not too shabby. Smosh hasn't uploaded a single video to Live Video since May's press release came out.

Lonelygirl15 has been harder to win back. Revver is still hosting the videos on its namesake website. The production team is also uploading its episodes to YouTube, but typically well after it's already up on Revver.

And this is before we even get into other sites such as Metacafe and Veoh, which have been sharing revenue with their hobbyist contributors before YouTube opened up the process two months ago.

Beyond the topOthers that have been invited to the Google ad-sharing program have responded well. Some webcam bloggers, such as Nalts and Renetto, are posting clips at a feverish pace, sometimes daily.

YouTube's plan is working, even if it hasn't opened up the floodgates to take in all original-content creators. By mobilizing its top draws, visitors don't seem to mind that unauthorized television clips that got YouTube into hot water with Viacom (NYSE:VIA) are harder to find these days.

Between its new partners and established media allies such as CBS (NYSE:CBS), Electronic Arts (NASDAQ:ERTS), and IAC/InterActiveCorp's (NASDAQ:IACI) CollegeHumor.com, the dinner bell is ringing for enterprising filmmakers and video bloggers blessed with the chops to draw a crowd.

But how much longer will it take before YouTube follows Revver into personally screening uploads to make sure they don't infringe on copyrights and then rewarding every original content contributor with a piece of the action?

More importantly, will it be chasing the competition even then? Revver raised the stakes this week. Until now, the company would run small graphical ads at the end of every stream. Creators would be paid only when someone was tempted enough to click on the ad. Now Revver will be testing pre-roll ads. No action will be required to generate a piece of the ad revenue, but the ad will run before the actual upload.

Yes, this is the way most major networks and news organizations do it. It remains to be seen whether video-sharing sites can still draw people with short attention spans if they wedge brief commercials into the introductions.

Maybe that will be the final straw. Maybe it'll finally get Lonelygirl15 to commit fully to YouTube. However, if the audiences don't flinch and higher ad revenue attracts even more upstart filmmakers to Revver, don't be surprised to see Google chasing the competition once again.

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Longtime Fool contributor Rick Munarriz is ready to officially classify himself as a clip-culture junkie. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

Author

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time with more than 20,000 bylines over those 22 years. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he splits his time living in Miami, Florida and Celebration, Florida.
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